Broadly better broadband plan

The Australian Financial Review and other observers have long complained that the national broadband network should not have proceeded without a proper cost benefit ana­lysis. The cut down version of the NBN released by Opposition Leader
Tony Abbott
and telecommunications spokesman
Malcolm Turnbull
effectively provides a cost benefit alternative, although constrained by the fact that many of the financial contracts for the NBN have been locked in place in the meantime.

But the essential difference – less risk for taxpayers, less smothering of competition and a quicker build but less increase in overall broadband speeds – seems to make it the better option.

The general shape of both policies is the result of a long struggle with
Telstra
, once the monopoly supplier of telecommunication services in this country, and still the owner of the copper wire network that connects the majority of houses. But in trying to loosen the stranglehold of one giant company that was once government-owned and still has a major share of the telecommunications market, the government insisted on creating another government-owned monopoly.

In announcing the NBN rollout in April 2009, then estimated to cost $43 billion, the government rejected bids from SingTel, Optus and others to build and operate the network with an injection of $4.7 billion in taxpayers funds. The private network was costed at $10 billion.

If and when it is completed, the NBN will be the Rolls-Royce of broadband services with fibre optic cable to all residences delivering 100 megabits per second of data delivery, whether the household wants it or not. But it is also far behind its original delivery schedule. In March, NBN Co revealed that its cables would pass between 190,000 and 220,000 homes by June 30, well short of its target of 341,000 homes.

More significantly, the project stifles any competition by denying Telstra or Optus the opportunity to offer competing broadband services over cable TV networks.

The opposition’s broadband plan will only take the fibre optic cable to street corners rather than to individual houses, will be completed two years earlier in 2019, and cost just $20.4 billion, as opposed to $37.4 billion for Labor’s plan. Telstra will be permitted to offer broadband services over its hybrid fibre-coaxial (HFC) pay TV network, and its copper will provide that vital last link for many homes.

Under that plan, Australian homes will get broadband service of at least 25 megabits per second by the end of the next government’s term in office in 2016, and 70 per cent of homes will get 50 megabits per second by 2019, should they want it. As has been noted in this newspaper, the existing contracts for the NBN mean that under Mr Turnbull’s proposal, one in five Australian homes will still get fibre optic connections all the way to the home

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Although some commentators have expressed disappointment that Coalition policy will not take the fibre optic connection to every residence, there is nothing to prevent the network from being extended later, or households from paying for their own connections – as happened with cable TV. Fibre will be automatically used in any new housing developments. There is also room for the development of competing access technologies that are not visible now. Considering the increasing use of wireless technologies in the use of smartphones, laptops and tablets, this is an important consideration.

The scaled down Coalition plan is not the gold-plated approach of the government but it remains an enormous project that will be a challenging to execute. However, Mr Turnbull’s scaled down version will still supply a lot of the benefits of an NBN for a lot less cost, while leaving the option to scale up later. The proposal also does not lock the project entirely into one particular technology at a time when technology is advancing rapidly.